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I'm a full time Senior Engineer at a venture backed software services company (~150 people). I've been here about 2.5 years (total 6 years exp).

Some backstory

In Christmas 2016, there were a round of redundancies and the company shrunk by about 20%. This was explained to use as a measure to make sure the company could survive until the next funding round and make the argument from investors for a larger sum.

Salary increase

But life goes on and we were told that things would continue as normal. I had my review in February and was granted a 3% salary increase (as opposed to 10% the previous 2 years)

This was understandable given the hard finances on the company and redundancies being such a close memory.

Redaction

2 Months passed and I didn't see the increase in my payslips, I was told I would be given "back-pay" on these amounts for any I missed. April just rolled around and I was told that the CEO has made an 'executive decision' to without these raises until the next round of funding.

The logic being that he can argue for a larger sum if he strangles the flow of cash in certain areas. With the promise of revisiting the issue after funding.

This is what my colleagues have called an 'indian giver'

Reaction

Obviously I'm very disturbed by this event obviously as there's nothing to stop him from changing his mind and doing another round of redundancies.

After some follow up questions he explained that it was the norm and other employees have received the same. Perks in the company seem to be untouched, but are still on the chopping block.

He seems to believe that this is perfectly normal behavior.

Question

TL;DR Is it common practice for CEO's to revert decisions on raises promised to employees?

I'm halfway between: A) Leaving and abandoning what appears to be a sinking ship or B) Stick it out and hope for some sort of progression later in the companies life and that my loyalty will be rewarded.

closed as off-topic by Masked Man, gnat, IDrinkandIKnowThings, JasonJ, Mister Positive Apr 12 '17 at 0:33

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  • redacted - "censor or obscure (part of a text) for legal or security purposes." Do you mean the boss covered the pay rise on the slip with black marker? Confused. – The Wandering Dev Manager Apr 11 '17 at 15:26
  • As @JoeStrazzere says, startups need to do things sometimes. Do we fail to pay the pay rise and maybe survive or pay it and go bust... – The Wandering Dev Manager Apr 11 '17 at 15:28
  • If you were given confirmation of your pay rise in writing, then consult a lawyer for advice on whether the CEO's "executive decision" to then not pay you your agreed salary was legal. We can't answer that. – Jonathon Cowley-Thom Apr 11 '17 at 16:22
  • Your question seems to ask if it's typical for this to happen. There's literally no way to know and answer that really. – user66194 Apr 11 '17 at 19:32
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    @JoeStrazzere I understand that "what should I do" is a personal challenge, in this case I'm just trying to understand if this is common practice or seen as a 'business as usual' for superiors to do this. Having not worked in many companies, this is unknown to me. – Smoore Apr 12 '17 at 14:21
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Is it normal/acceptable for CEO's to revert decisions on raises promised to employees?

Well I wouldn't call it normal.

If they are having trouble with the next round of funding, then it might be reasonable.

Whether is it acceptable is your decision. For me it would come down to whether it was actually reverted, or if the raise was just deferred until after funding. And you won't know that unless you (1) get funding (2) at an acceptable level. No funding means no company and reduced funding means no raises.

I started a new job and when accepting the offer, I asked about the finances. My boss said he didn't know, but he'd find out. When the CFO got back from vacation she had a meeting with me and said, "With our current burn rate we'll run out of money in May." It was March. She noticed my startled expression and said, "If we don't get money by next month we will adjust some things and can probably last until September. I thought you were asking about our current burn rate."

"That's okay," I replied, "I was just startled by your honesty." If your company is that honest, I expect they can be trusted. Most CFOs aren't so honest... and it may be because most people can't handle that kind of answer. They got the money and I worked there four more years, receiving the 10% raise that was in my employment contract at the 90-day mark as promised.

On a different note: I realize it is what your co-workers are saying, but you should probably avoid using the term "Indian giver"

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    Understood on the "Indian Giver" remark. It seemed a tad harsh. Thanks for the insight into your situation, the general consensus seems to be that its not uncommon and depends on a lot of factors, but in general is a bad sign. – Smoore Apr 12 '17 at 15:30
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None of us can know what the future will bring. That being said, the message from higher is loud and clear:

We will be taking care of our own concerns and interests foremost.

So now you have to ask yourself: Do you want to continue working for a company in which such decisions are taken without you even being informed?

Clearly they don't believe that your opinion on the matter of your raise being withheld is worth listening to, so what makes you think that they'll be rewarding your loyalty further down the line?

Take a page from their book and do what's best for you.

  • Agree. Start looking for a new job. Looks like a sinking ship, as OP stated. – user66194 Apr 11 '17 at 15:36
  • Or they figure that keeping the company operating and keeping as many of their staff employed until the market turns is more important than giving raises only to close the doors in a few months. – IDrinkandIKnowThings Apr 11 '17 at 16:56
  • @IDrinkandIKnowThings - we might never know, as they chose to exclude their staff from this very critical conversation. Not handing out raises at a difficult moment is understandable. The lack of communication is not, and either shows contempt for their staff, or points to a very dire situation. – AndreiROM Apr 11 '17 at 17:08
  • @AndreiROM - But publicizing how bad the financial situation is is likely to start a stampede out the door, which is going to sink the company also. That solution is not in your employee's interest either. – IDrinkandIKnowThings Apr 11 '17 at 19:35
  • @IDrinkandIKnowThings - or you could treat your employee with a modicum of respect, invite him to a meeting, privately explain that he's not getting a raise after all, and ask him to keep it to himself. – AndreiROM Apr 11 '17 at 20:01
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You have a startup where you are working. Often higher compensation or equity is paid vs. more established companies because of the higher risk involved with being part of a start-up.

Now, taking an objective look, if you have a startup that, in sequence -

  1. Cuts 20% of the workforce.
  2. Slashes raises to a fraction of what they were, historically
  3. Does not pay even the reduced amount of the raises

Does this not indicate a company that is failing? To use your sinking ship analogy, these are all indications of trying to bail out incoming water, but being unable to deal with the holes that are letting the water in.

At the very least, you should look to line up other opportunities to get into a more secure situation, or to at least already be well into the process when the next round of cost-cutting measures begins, and you're suddenly out of work.

"I can't pay you now, but I will later. Oh, right, I'm not going to pay you later, either" is never a good sign. It's much worse than saying "no raises" from the start, I think.

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One thing you have not addressed is the outlook for the company. Currently the company is on hard financial times and struggling to maintain a future. If things do not change they will eventually go broke and you will be out of work. So the big question is: Will things change?

Some of the startups I worked at had, as part of the monthly briefing to employees, the sales funnel for the company's products. From there you can make your own assessment despite the words of the salesmen. Is the burn rate far outpacing sales? Are sales increasing? Are they close to landing the "big thing"? If such a thing is not common knowledge you will have to work a bit to find out how things are going.

In the end, 3% or 10% pay raise, at a startup should not be what you are shooting for. You are hoping that those stock options are worth a lot of money.

So if the outlook for the company is good lobby the CEO for additional stock option grants. They cost him nothing, and this should improve morale. He should make a big deal out of it, as going public and being able to cash out half a million or more in stock is worth far more than a small pay raise.

If the outlook for the company is bad, then leave.

  • There is also the question: Will things change for you? – gnasher729 Apr 12 '17 at 20:36

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